ENFORCEMENT OF AN AWARD AGAINST A NON-SIGNATORY: A CASE COMMENT ON

GEMINI BAY TRANSCRIPTION V. INTEGRATED SALES SERVICE

GUNJAN CHHABRA1

In the recent case of Gemini Bay Transcription Pvt. Ltd. vs. Integrated Sales Service Ltd. 2
and Anr. which was decided on 10 August 2021, by the Supreme Court of India,  an
interesting question was presented before the apex court i.e., whether an award could be
enforced against a party who was not a signatory to the arbitration agreement. 

This was a case in which the award being dealt with, was a Foreign Award 3 in an
International Commercial Arbitration4, as a result of which the questions were raised in
relation to Part II of the Arbitration & Conciliation Act, 1996 (“Act”).

In this case, the Supreme Court permitted the enforcement of a foreign award rendered
against a party who was not a signatory to the arbitration agreement. It is interesting to note
the various facets of the case, which the Apex Court dealt with.

Factual Matrix:

A Representation Agreement (RA) was executed between Integrated Sales Services Ltd.
(ISS) of Hong Kong and DMC Management Consultants Ltd. (DMC), an Indian company
based at Nagpur. Pursuant to the RA, Integrated Sales was to assist DMC in its efforts to sell
its goods and services to customers. Additionally, ISS was to identify potential sources of

1
Partner, Dispute Resolution with Adwitya Legal LLP. <email: gunjan@adwlegal.co.in>; Grateful for assistance
to Ms. Aanya Anvesha, student of law, currently interning with Adwitya Legal LLP.
2
2021 SC 572.
3
Foreign Awards are awards where the Place of Arbitration (Seat) is outside India, and are as such recognized
as foreign awards within the meaning of Section 44 of the Act.
4
Section 2(f) of the A&C act defines an “International Commercial Arbitration” as “arbitration relating to
disputes arising out of legal relationships, whether contractual or not, considered as commercial under the law
in force in India and where at least one of the parties is— (i) an individual who is a national of, or habitually
resident in, any country other than India; or (ii) a body corporate which is incorporated in any country other
than India; or (iii) an association or a body of individuals whose central management and control is exercised
in any country other than India; or (iv) the Government of a foreign country”.
investment and investors and assist the DMC in negotiating the terms of purchase, sale and
investment. For these services ISS was to receive commission as per the terms in RA. As per
the RA, the agreement was subject to laws of USA and every dispute arising in connection
with the agreement was to be referred to single arbitrator in USA. The RA was signed by one
Shri Rattan Pathak on behalf of DMC, though subsequent amendments to the RA were signed
by Shri Arun Dev Upadhyaya on behalf of DMC. Disputes arose between the parties
resulting into invocation of arbitration proceedings by ISS.

In the arbitration proceedings, ISS impleaded Mr. Arun Dev Upadhyaya, DMC, DMC
Global, Gemini Bay Consulting Ltd. (GBC) and Gemini Bay Transcription Private Ltd.
(GBT) as respondents. ISS’s alleged that Mr. Upadhyaya was the chairman of DMC and was
in fact the person controlling the affairs of DMC and other respondents. ISS alleged that it
had introduced two new clients to DMC and that Mr. Upadhyaya used other respondent
companies to divert the business of the aforesaid two customers away from DMC to GBT and
GBC with an intent to deprive ISS of its commission. ISS claimed 20% commission in terms
of the RA on the gross revenues earned by respondent companies from the aforesaid two
customers, for the period they continued to be the customers. Gemini Bay objected that the
arbitration agreement entered into between Integrated Sales and DMC was not enforceable
against it as it was a third party.

The arbitrator issued an award on March 28, 2010 (“Award”) in which he held that DMC,
DMC Global Inc., GBCL and GBT along with the Chairman were jointly and severally liable
to recompense ISS. In doing so, the arbitrator applied Delaware Laws and also found in
favour of ISS that the corporate veil of DMC and DMC’s related parties could be lifted as
they had acted in collusion. Thus, the Award was issued against non-signatories also.

It was a matter of fact, that the Award was not challenged in USA. ISS approached the High
Court of Judicature at Bombay (HC), Nagpur Bench for enforcement of the Award. Although
the learned judge enforced the Award as against DMC, it found that the Award could not
bind the non-signatories to the arbitration agreement.

Against this Order of the Single Judge of the Bombay HC, an Appeal was filed before the
Division Bench of the HC. In the appeal, the Division Bench held that the award was
enforceable as against the non-signatories as well.
It was against this Order of the Division Bench of the Bombay HC, that the non-signatory
parties moved Supreme Court.

Contentions Raised & Findings of the Supreme Court:

Burden to Prove the Enforceability of a Foreign Award

GBT argued, while relying on Sections 44 and 47 of the Arbitration & Conciliation Act, 1996
that under Section 47(1)(c), the burden of proving that a foreign award may be enforced
under Part II is on the person in whose favour that award is made. It was also argued that
such burden in the case of a non- signatory to an arbitration agreement can only be
discharged by adducing evidence which would independently establish that such non-
signatory can be covered by the foreign award in question. It was thus argued that since the
party seeking the enforcement of the award had not done so, the threshold of burden of proof
requirement is not met, because of which the enforcement petition ought to have been
dismissed on this ground alone.

The SC observed that the requirements of Section 47(1) are procedural in nature. The object
of Section 47(1) is that the enforcing court must first be satisfied that it is indeed a foreign
award5, as defined, and that it is enforceable against persons who are bound by the award.

Section 47(1)(c) does not require substantive evidence to “prove” that a non-signatory to an
arbitration agreement can be bound by a foreign award. In fact the only evidence required
under the provision, is to prove that the award is a foreign award, as the section contains the
six ingredients required for an award to be a foreign award, as defined.

The contention that the burden of proof was on the person enforcing the foreign award and
that such a burden can only be discharged by such person by leading evidence to
affirmatively show that a non-signatory to an arbitration agreement can be bound by a foreign
award, was not accepted, as it was found outside the scope of Section 47(1)(c) of the Act.
5
Section 44 of the A&C Act defines “foreign awards” as “an arbitral award on differences between persons
arising out of legal relationships, whether contractual or not, considered as commercial under the law in force
in India, made on or after the 11th day of October, 1960— (a) in pursuance of an agreement in writing for
arbitration to which the Convention set forth in the First Schedule applies, and (b) in one of such territories as
the Central Government, being satisfied that reciprocal provisions have been made may, by notification in the
Official Gazette, declare to be territories to which the said Convention applies”.
Refusing Enforcement of Award under Section 48(1)(a)

Section 48 of the Act provides for the grounds on which the enforcement of a foreign award
may be refused, at the request of a party against whom it is invoked. GBT argued that a non-
signatory to an arbitration agreement would be directly covered by sub-clause (a) of Section
48(1)6.

The Supreme Court here observed, that if Section 48(1)(a) is interpreted literally then it
clearly speaks only of “parties to the agreement” being under some incapacity, or the
agreement being invalid under the law to which “parties” have subjected it. Thus no doubts
exists that a non-party to the agreement, alleging that it cannot be bound by an award made
under such agreement, is outside the literal construction of Section 48(1)(a). In view of the
same, this argument of GBT was also refused.

Refusing Enforcement of Award under Section 48(1)(b)

GBT argued that the ground under Section 48 (1)(b), referring to natural justice, would be
attracted, to refuse enforcement of the award, as no proper reasons have been given by the
Arbitrator7.  The apex court held that the said provision does not speak of absence of reasons
in an arbitral award at all. The only grounds on which a foreign award cannot be enforced
under Section 48(1)(b) are grounds relatable to the lack of notice of appointment of the
arbitrator or of the arbitral proceedings, or that a party was “otherwise unable to present its
case” before the arbitral tribunal, as laid down in Vijay Karia v. Prysmian Cavi E Sistemi SRL 8
All of these are only applicable at the hearing stage before the arbitrator and not after the
award has been delivered. Thus, this argument was also rejected.

Refusing Enforcement of Award under Section 48(1)(c)

6
Section 48(1)(a) provides that the enforcement of a foreign award may be refused, at the request of a party
against whom it is invoked if it proves that “the parties to the agreement referred to in section 44 were, under
the law applicable to them, under some incapacity, or the said agreement is not valid under the law to which the
parties have subjected it or, failing any indication thereon, under the law of the country where the award was
made”.
7
Section 48(1)(b) provides that the enforcement of a foreign award may be refused, at the request of a party
against whom it is invoked if it proves that “the party against whom the award is invoked was not given proper
notice of the appointment of the arbitrator or of the arbitral proceedings or was otherwise unable to present his
case”.
8
(2020) 11 SCC 1.
The Supreme Court with respect to Section 48(1)(c) 9, observed that an arbitral award would
not be beyond the scope of submission to arbitration if the determination therein could be
said to have been fairly comprehended as “disputes” within the arbitration agreement. Given
the fact that the expression ‘submission to arbitration’ would refer primarily to arbitration
agreement, sub-clause (c) only deals with a dispute that could be said to be outside the scope
of arbitration agreement between the parties and not to whether a person who is not a party to
the agreement can be bound by the same.

The court had relied on the decision of the Supreme High Court in Aloe Vera of America, Inc
v. Asianic Food (S) Pte Ltd & Anr.10, and held that the ground of challenge under Section
48(1)(c) relates to the scope of the arbitration agreement and not on whether a particular
person was a party to that agreement or not.

Perversity

GBT also contended that the award is perverse because vital evidence was not led in support
of the claimant’s case before the arbitrator and this is an accepted ground to set aside an
award in an International Commercial Arbitration. 

However, the court placing reliance on Ssangyong Engg. & Construction Co. Ltd. v. NHAI11
(“Ssangyong”), observed that perversity as a ground cannot be used to set aside an award in
an international commercial arbitration after the 2015 Amendment12 to the Act.
The Ssangyong judgement had elaborated that the ground of “patent illegality appearing on
the face of the award” is an independent ground of challenge which applies only to awards
made under Part I and does not involve international commercial arbitrations. Thus, the
“public policy of India” ground after the 2015 Amendment does not take within its scope,
“perversity of an award” as a ground to set aside an award in an International Commercial
Arbitration under Section 34, and concomitantly as a ground to refuse enforcement of a
foreign award under Section 48, being a pari materia provision which appears in Part II of
the Act.
9
Section 48(1)(c) provides that the enforcement of a foreign award may be refused, at the request of a party
against whom it is invoked if it proves that “the award deals with a difference not contemplated by or not
falling within the terms of the submission to arbitration, or it contains decisions on matters beyond the scope of
the submission to arbitration”.
10
2006 SGHC 78.
11
(2019) 15 SCC 131.
12
The Arbitration and Conciliation (Amendment) Act, 2015.
Commission of Tort Outside the Scope of Arbitration Agreement

Another argument by GBT was that the commission of a tort would be outside the scope of
contractual disputes that arise under the arbitration agreement and that since the cause of
action really arose in tort, the award was vitiated on this ground.

It was observed that that tort claims may be decided by an arbitrator provided they are
disputes that fall within the arbitration clause. The arbitration clause in the present case
provided, “…(ii) In the event a dispute arises in connection with this Agreement, such
dispute shall be referred to a single arbitrator…”. Therefore, even a tort claim could be
decided in arbitration if it “arises in connection with the agreement”. Relying on Renusagar
Power Co. Ltd. v. General Electric Co.13, it was observed that the relevant question is not
whether a claim lies in tort but whether even though it has lain in tort it “arises out of” or is
“related to” the contract. Reliance was also placed on Tarapore & Co. v. Cochin Shipyard
Ltd.14 and Astro Vencedor Compania Naviera S.A. of Panama v. Mabanaft GmbH 15 to dismiss
this contention.

Power under Section 46

GBT further argued that comparing Sections 3516 and 4617 of the Act would show that the
power of the enforcing court under Section 46 is circumscribed and a foreign award would be
binding on parties alone and not on others. This argument was made by placing reliance on
three cases Indowind Energy Ltd. v. Wescare (India) Ltd.18, Chloro Controls India (P) Ltd. v.
Severn Trent Water Purification Inc.19and Cheran Properties Ltd. v. Kasturi & Sons Ltd,20

13
(1984) 4 SCC 679.
14
(1984) 2 SCC 680.
15
(1971) 2 QB 588.
16
Section 35 of the A&C Act provides that subject to Part I “an arbitral award shall be final and binding on the
parties and persons claiming under them respectively".
17
Section 46 of the A&C Act provides that a foreign award enforceable under this Chapter I of Part II of the act
“shall be treated as binding for all purposes on the persons as between whom it was made, and may
accordingly be relied on by any of those persons by way of defence, set off or otherwise in any legal
proceedings in India and any references in this Chapter to enforcing a foreign award shall be construed as
including references to relying on an award”.
18
(2010) 5 SCC 306.
19
(2013) 1 SCC 641.
20
(2018) 16 SCC 413.
However, the Supreme Court held that Section 46 of the arbitration & Conciliation Act does
not speak of “parties” at all, but of “persons”. Therefore under Section 46 “persons” may,
even be non-signatories to the arbitration agreement. Also, Section 35 of the Act speaks of
“persons” in the context of an arbitral award being final and binding on the “parties” and
“persons claiming under them”, respectively. Section 35 would, therefore, refer to only
persons claiming under parties and is, therefore, more restrictive in its application than
Section 46 which speaks of “persons” without any restriction.

Damages Awarded Without Any Basis

The final argument by GBT was that the damages were awarded without actual loss having
been proved before the Arbitrator. This was contrary to the judgment of the Delhi High Court
in Agritrade International (P) Ltd. v. National Agricultural Coop. Mktg. Federation of India
Ltd.,21 (“Agritrade”) and hence the award stood vitiated.

This contention was also rejected since it did not fall within any of the exceptions contained
in Section 48(1) of the Act. Moreover, it distinguished the facts in this case
from Agritrade  as actual loss can be said to have been occasioned to the respondent.
Additionally, in order to attract Section 48(2), read with Explanation 1(iii), “it is only in
exceptional cases which involve some basic infraction of justice which shocks the conscience
of the court that such a plea can be entertained”,22 which was not the case in this dispute.

Conclusion

This judgement settles the position of Indian law that an award would be enforceable even
against non-signatories.

The Indian Supreme Court has displayed a pro-enforcement stance through this judgement. It
is still to be seen what remedies non-signatories would have to challenge the award, seeing as
how the Supreme Court has reasoned, that non-signatories to an arbitration agreement cannot
raise an objection to the enforcement of awards of India under Section 48(1) (a) on the

21
(2012) SCC 896.
22
(2019) 15 SCC 131.
ground that they are “not party to the arbitration agreement”. The door to any such challenge
by non-signatories in enforcement proceedings in India remains closed as of now.